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UK Supreme Court Approves Alcohol Minimum Unit Pricing

Posted on 15th November 2017 at 2:47 pm

Today, in a landmark ruling of a bench of seven Supreme Court justices, the UK Supreme Court has rejected an appeal by the Scotch Whisky Association which sought to challenge the imposition of a minimum unit price for alcohol sold in Scotland.

Alcohol (Minimum Pricing)(Scotland) Act 2012

On 24 May 2012, the Scottish Parliament passed the Alcohol (Minimum Pricing)(Scotland) Act 2012 (the ‘2012 Act’). The 2012 Act subsequently received Royal Assent on 29 June 2012. What the 2012 Act does is amend the Licensing (Scotland) Act 2005 by inserting a new clause 6A which sets out that alcohol cannot be sold below the minimum price. Subsequently, a draft order was published which set out that the minimum unit price for alcohol would be 50p per unit.

Following the passing of the 2012 Act, the Scotch Whisky Association, and other sellers of alcoholic beverages throughout the European Union, raised a judicial review at the Court of Session challenging the legislation as falling foul of European Union Law. Particularly, that the 2012 Act outside the legislative competence of the Scottish Parliament as it is not compatible with EU law because it contravenes article 34 of the Treaty on the Functioning of the European Union (‘TFEU’).

At first instance, the Lord Ordinary, Lord Doherty, rejected the petition and stated that the Scottish Government was entitled to rely on the derogation from Article 34 for the protection of health and life of humans found in Article 36 TFEU. The Lord Ordinary also found that the 2012 Act was a proportionate measure for achieving the aims of the legislation. Namely, the reduction of alcohol consumption generally, whilst also specifically targeting the inexpensive and strong alcoholic drinks most often consumed by harmful and hazardous drinkers. On appeal, the First Division of the Inner House of the Court of Session upheld the Lord Ordinary’s decision.

The Scotch Whisky Association subsequently appealed the decision of the Inner House to the Supreme Court. The remaining ground of challenge is that minimum unit pricing contravenes article 34 TFEU, and Regulation (EU) No 1308/2013 establishing a Common Organisation of the Markets in agricultural products (including wine) and the Common Agricultural Policy.

Appeal to the Supreme Court of the United Kingdom

The Supreme Court has now unanimously dismissed the appeal by the Scotch Whisky Association, effectively bringing an end to this five-year saga. In rejecting the appeal, the Supreme Court held that the 2012 Act does not breach EU Law, and that it represents a proportionate measure to achieve a legitimate aim.

During the appeal, all sides accepted that the 2012 Act would have a distorting effect on the market for alcoholic beverages. The question, as it always has been, was whether or not the Scottish Ministers could justify this distortion in terms of the aforementioned derogation under Article 36 TFEU.

As noted above, the aim of the 2012 Act is not to eradicate alcohol consumption, but rather to reduce it, specifically as it pertains to the inexpensive alcohol typically consumed by harmful and hazardous drinkers, who tend come from the most deprived communities. The Appellants did not contend that this was not a laudable aim. However, the Appellants argued that Minimum Unit Pricing itself was not the least restrictive way to achieve this aim. The Appellants suggested that taxation would be a less restrictive, and equally effective, measure in this regard.

Both the Lord Ordinary and the Inner House determined that the use of increased taxation would, if passed on to the consumers, lead to a price increase across all alcoholic drinks. By contrast, minimum pricing would target inexpensive alcohol. Further, there are constraints on taxation due to European Directives 92/83/EEC and 93/83/EEC, which require uniform rates of taxation. As such, there is no scope for there to be a price cap, so there is no scope to target inexpensive alcohol.

Further, both the Lord Ordinary and the Inner House found that Minimum Unit Pricing was easier to understand and to enforce than taxation. For instance, increasing taxation had no way of setting a minimum price for alcohol, as supermarkets could continue to loss lead with alcohol and elect not to pass on the increased costs to the customers. It is not possible for retailers or producers to do this with Minimum Unit Pricing.

The Supreme Court agreed with the approaches taken by the Lord Ordinary and the Inner House in finding that the 2012 Act was a proportionate measure for seeking to reduce the consumption of inexpensive alcohol favoured by harmful and hazardous drinkers, and the associated public health issues.

One factor that the Supreme Court took into account in finding that the legislation was proportionate was that the 2012 Act had a ‘Sunset Clause’ built into it. What the Sunset Clause requires is for the Scottish Ministers to consider the effectiveness of the legislation after five years. If the legislation is not renewed by the Scottish Ministers, it will simply lapse after six years. The Supreme Court considered that the obviously experimental nature of the legislation further evidenced that it was proportionate.

Conclusions

It is now possible that Minimum Unit Pricing will come into effect in the spring. Then will begin the five-year ‘trial’ period in which all will wait to see if the legislation is able to have the effect that the Scottish Ministers, and others, are of the belief that it will have.

In the meantime, it is likely that off sales will be particularly affected, as that is where the greatest proportion of alcohol is sold for below 50p per unit. It is doubtful that the on-trade sector will be terribly impacted, as pubs and clubs tend to sell alcohol above the minimum price. In addition, it is unlikely that moderate drinkers, and drinkers of more premium alcohol, will feel the effects of the legislation as they tend to drink alcohol which is already sold at more than 50p per unit. However, until the legislation becomes fully operable this is all theoretical. We will simply have to keep an eye on how the new reality plays out.

Author

Graham is a Senior Solicitor within the Commercial Dispute Resolution Group.

He specialises in commercial litigation, advising clients during the dispute resolution process, including conducting ordinary and commercial litigation in the Sheriff Court and both the Inner and Outer Houses of the Court of Session.

Graham appears regularly in the Sheriff Courts, representing clients at a variety of hearings including those for interim diligence, liquidations and sequestrations, and opposed motions.

Graham acts for a broad range of clients including public and private companies, individuals, insolvency practitioners and charities.

He focuses mainly on contractual disputes, corporate and personal insolvency litigation, and debt recovery. However, Graham also has experience in actions relating to professional negligence, defender personal injury, contentious construction, Judicial Review, and procurement.

Graham also has experience of alternative dispute resolution, including significant experience in negotiation and representing clients in mediation.

Additionally, Graham’s work has contributed to MacRoberts being shortlisted for Commercial Team of the Year at the British Legal Awards 2016

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